SUMMARY: This document contains a final exemption from the prohibited
transaction restrictions of the Employee Retirement Income Security Act of 1974
(ERISA), the Federal Employees' Retirement System Act of 1986 (FERSA) and the
Internal Revenue Code of 1986 (the Code). The exemption applies to certain
prospective transactions between employee benefit plans and parties in interest
where such transactions are specifically authorized by the Department and are
subject to terms, conditions and representations which are substantially
similar to exemptions previously granted by the Department. The exemption
affects plans, participants and beneficiaries of such plans and certain persons
engaging in such transactions.

DISCUSSION OF THE EXEMPTION: As part of the Department's continuing efforts
to reduce regulatory burdens associated with processing individual exemptions
for transactions prohibited under ERISA, this class exemption permits a plan to
engage in a transaction following a demonstration to the Department that the
transaction: (1) is substantially similar to those described in two prior
individual exemptions granted by the Department; and (2) presents little, if
any, opportunity for abuse or risk of loss to a plan's participants and
beneficiaries. Under the class exemption, a party may proceed with a
transaction in as little as 78 days from the acknowledgement of receipt by the
Department of a written submission filed in accordance with the terms of the
class exemption. The time-frames contained in the exemption enable the
Department to fully consider the written submission for compliance with the
terms of the class exemption and provide interested persons with a reasonable
opportunity to comment on the proposed transaction following the receipt of
notification.

SUPPLEMENTARY INFORMATION: On November 27, 1995, the Department of Labor
(the Department) published a notice in the FEDERAL REGISTER (60 FR 58376) of
the pendency of a proposed class exemption from the restrictions of sections
406(a), 406(b)(1) and 406(b)(2) of ERISA and from the taxes imposed by section
4975(a) and (b) of the Internal Revenue Code (the Code), by reason of section
4975(c)(1)(A) through (E) of the Code.

The Department proposed the class exemption on its own motion pursuant to
section 408(a) of ERISA and section 4975(c)(2) of the Code, and in accordance
with the procedures set forth in 29 CFR part 2570, subpart B, (55 FR 32836,
August 10, 1990).1

The notice of pendency gave interested persons an opportunity to comment or
request a public hearing on the proposal. No requests for a public hearing with
respect to the proposed class exemption were received by the Department. Six
public comments were received by the Department. Upon consideration of the
record as a whole, the Department has determined to grant the proposed class
exemption subject to certain modifications. These modifications and the
comments are discussed below.

Discussion of Comments Received

One commenter urged the Department to modify the final exemption to provide
relief from section 8477(c)(2) of FERSA which parallels section 406(b) of
ERISA.2 The commenter stated that the scope of the class exemption
should be expanded to enable the Thrift Savings Plan for federal employees to
take advantage of the relief provided by the exemption. The Department sees
merit in this comment and believes that providing such relief is consistent
with the policy and safeguards embodied in this exemption. Accordingly, the
Department has modified section II of the final exemption to provide relief
from section 8477(c)(2) of FERSA.

Another commenter requested that the Department clarify that the relief
provided in the class exemption applies to transactions involving multiemployer
plans. The Department notes that the exemption applies to transactions which
are substantially similar to transactions described in at least two individual
exemptions granted by the Department within the 60- month period prior to the
written submission filed in accordance with the class exemption. In this
regard, the conditions of the exemption do not include a requirement of
substantial similarity between the type of plan involved in the proposed
transaction under the class exemption and the type of plans involved in the
previously granted individual exemptions (i.e., single employer or
multiemployer plans). Accordingly, it is the view of the Department that
sections I(a) and II(b) will be satisfied in the case of a multiemployer plan,
if such plan relies on two substantially similar individual exemptions
involving single employer plans.

A commenter requested clarification regarding sections I(b) and II(b) of the
exemption which require that there be little, if any, risk of abuse or loss to
the plan participants and beneficiaries as a result of the transaction. The
commenter expressed concern that this condition may require that the party who
is to engage in the transaction guarantee that a plan never experience a loss
as a result of the subject transaction. As a result, the commenter requested
that the Department clarify this condition to provide that, if a transaction is
prudent when entered into, the relief provided by the class exemption will not
be retroactively revoked should there be some future decline in the value of
the asset. It was not the intent of the Department that this condition act as a
guarantee of the future performance of the transaction. The Department notes
that, for purposes of determining whether a transaction poses little, if any,
risk of abuse or loss to the plan, the party should examine the facts and
circumstances surrounding the transaction as of the date that the transaction
is to be entered into.

Two commenters requested that the Department expand the relief provided by
the exemption to include relief from section 406(b)(3) of ERISA. One of the
commenters noted that section 406(b)(3) relief would only be available if such
relief was provided in the two substantially similar individual exemptions
granted by the Department within the prior 60-month period. The Department sees
merit in these comments and has modified the final exemption accordingly. In
this regard, the Department notes that any of the relief from specific ERISA
restrictions provided by the class exemption for a particular transaction is
available only to the extent that the same relief is provided in the two
substantially similar individual exemptions previously granted by the
Department.

A commenter requested that the term "independent fiduciary" as
used in section II be defined in the final exemption.3 Another
commenter urged that the Department be flexible in determining who may serve as
independent fiduciary and suggested that the sponsoring employer or other
existing plan fiduciary be permitted to act in that capacity. Because of the
variety and constantly evolving nature of the products and service arrangements
presented to the Department for its consideration under ERISA section 408(a),
the Department does not believe that it would be appropriate to adopt a
definition that, in effect, would require compliance with certain enumerated
standards. Rather, the Department generally has adopted a flexible approach
with respect to the qualification of a party to act as an independent fiduciary
in any particular situation. In this regard, individual exemptions granted by
the Department have required that there be no affiliation between the
independent fiduciary and the party or its affiliates seeking to engage in the
transaction and that the independent fiduciary receive no more than a de
minimis amount of compensation from the party seeking to engage in the subject
transaction, including amounts received for services as independent fiduciary.
In certain cases, such as a transaction between a plan and a party unrelated to
the plan sponsor, the plan sponsor may qualify to act as independent fiduciary
on behalf of the plan. In addition, as noted in the preamble to the proposed
exemption, "...the independent fiduciary should be knowledgeable and
experienced with respect to the type of transaction." The Department
encourages parties to consider, when retaining an independent fiduciary, any
unique qualifications of the independent fiduciaries utilized in the two or
more individual exemptions being relied upon.

One commenter requested that the Department delete the requirement under the
proposed exemption relating to the distribution of notice to interested
persons. According to the commenter, the requirement of notice and a comment
period does not seem to serve a useful purpose and prolongs the approval
process. The Department notes that the proposed exemption provides broad relief
for various party in interest transactions that do not come within the scope of
relief provided by existing statutory or class exemptions. In this regard,
comments submitted to the Department by interested persons in response to the
publication of a proposed individual exemption in the Federal Register may
raise substantive factual, legal or policy issues which are not apparent from
the information contained in the exemption application. Under the proposed
class exemption, publication of notice in the Federal Register would not be
required. Accordingly, the Department believes that the distribution of notice
affording interested persons the opportunity to comment on a proposed
transaction is an important safeguard under the class exemption. As a result,
the Department has determined not to modify the exemption in this regard.

The commenter also suggested that the term "completion of distribution
of the notice" contained in the definition of "comment period"
under section IV(e) of the proposal should be modified to permit the party who
is to engage in the transaction to make a reasonable estimate of the time
necessary for completion of notice such as three days after sending notice by
first-class mail. The Department notes that, under section IV(e), the comment
period expires 25 days following the completion of the distribution of notice
to interested persons. Accordingly, the expiration date of the comment period
is necessarily dependent upon the date that distribution of the notice is
completed. The Department is of the view that the requirements of the exemption
relating to the comment period as defined under section IV(e) will be met if
the party makes a good faith estimate of the time necessary to complete
distribution of the notice. In this regard, the Department has modified section
IV(e) to specifically provide that a party may assume that distribution of
notice will be complete three business days following the date of first class
mailing of such notice.

The commenter also suggested that the class exemption contain a requirement
that the party wishing to engage in the transaction must inform interested
persons of the date of the expiration of the comment period. The commenter
noted that the preamble to the proposed class exemption referred to the
responsibility of the party to notify interested persons of the date of the
expiration of the comment period, but that such notification was not
specifically included as a condition of the proposed class exemption. The
commenter stated that such a requirement should appear among the terms and
conditions of the class exemption. The Department sees merit in this comment
and has modified section IV(b) to provide that the notice to interested persons
include the date of the expiration of the comment period.

One of the commenters requested that the Department delete the 60-month
requirement described in sections I(a) and II(a) of the class exemption.
Sections I(a) and II(a) require that a transaction be substantially similar to
transactions described in at least two individual exemptions that were granted
by the Department within the 60-month period ending on the date a written
submission is filed. The Department notes that the 60- month requirement was
developed to ensure that the two substantially similar individual exemptions
that the party compares to its proposed transaction reflect the current
exemption policies of the Department. Therefore, the Department is unable to
conclude that deletion of this requirement is warranted.

A commenter urged the Department to adopt a more liberal definition of the
term "substantially similar." Section IV(a) defines the term
"substantially similar" as alike in all material respects. The
commenter suggested that the precedential exemptions be considered
substantially similar where, in the Department's judgement, there presents
little possibility of abuse due to the difference in facts. The Department is
not persuaded by the argument submitted in favor of an expanded definition of
the term "substantially similar". The proposed exemption's premise
was that the Department could provide expedited consideration of a party's
written submission within the timeframes delineated in the proposal only if the
transaction was substantially similar, as defined under the exemption, to two
other transactions previously considered by the Department. The Department
believes that the commenter's suggestion for a more liberal definition of
"substantially similar" is inconsistent with the underlying premise
of the class exemption. For this reason, the Department has determined not to
modify this definition.

One commenter requested a number of modifications to the proposal based upon
its belief that the class exemption should be applicable to generic
transactions that would otherwise be the subject of a class exemption. The
Department notes that the preamble to the proposal indicates that the party
wishing to take advantage of the exemption must demonstrate that the
transaction is substantially similar to at least two individual exemptions
previously granted by the Department. The Department notes that it determined
to propose relief based, in part, on its observation that many of the
individual applications contain nearly identical transactions, terms and
conditions as those previously granted. Accordingly, because the proposal
limits relief to identifiable individual transactions and the parties thereto,
not generic transactions, the modifications requested by the commenter are
beyond the scope of this proceeding. Lastly, the Department notes that the
great majority of class exemption requests considered by the Department over
the previous 20 years presented unique facts and circumstances that were not
substantially similar to prior exemptions granted by the Department.

The same commenter also urged the Department to extend the relief provided
by the class exemption to include transactions that have taken place prior to
the submission required under part III of the exemption. Another commenter
urged the Department to consider retroactive relief to the date of the written
submission under the class exemption. The Department noted in the preamble to
the proposal that ". . . in light of the broad scope of relief provided
under the proposal, the class exemption is only available with respect to
prospective transactions." It appears to the Department that providing
retroactive relief under the class exemption could result in the completed
transaction not being in compliance with one or more of the requirements of the
class exemption, including the requirement that the transaction be
substantially similar to two previously granted exemptions. In addition, the
Department continues to believe that providing interested persons with the
opportunity to comment on a contemplated transaction is an important safeguard
under the class exemption. Accordingly, the Department has decided not to adopt
this comment.

Conditions

The exemption contains conditions, as described below, which are necessary
to support a finding that the exemption meets the statutory standards of
section 408(a) of ERISA.4

Under section I of the exemption, relief is provided for transactions, as
discussed below, from certain of the restrictions described in section 406(a)
of ERISA. In this regard, section I(a) requires that the transaction be
substantially similar to transactions described in at least two individual
exemptions that were granted by the Department, and which provided relief from
the same restrictions as requested by the party, within the 60-month period
ending on the date a written submission is filed. "Substantially
similar" is defined in section IV(a) as alike in all material respects.

Section I(b) of the exemption requires that there be little, if any, risk of
abuse or loss to the plan participants and beneficiaries as a result of the
transaction. Section I(c) further provides that prior to the execution of a
transaction, the authorizing requirements of section III must be satisfied (as
discussed below).

Under section II of the exemption, additional relief is provided from
certain of the restrictions described in sections 406(b) of ERISA and the
parallel restrictions described in section 8477(c)(2) of FERSA provided that:
(a) the transaction is substantially similar (as defined in section IV(a)) to
transactions described in at least two individual exemptions that were granted
by the Department, and which provided relief from the same restrictions or, if
FERSA relief is requested, the ERISA relief provided parallels the restriction
of section 8477(c)(2) of FERSA, within the 60-month period ending on the date
of filing of the written submission; (b) there is little, if any, risk of abuse
or loss to the plan participants and beneficiaries as a result of the
transaction; and (c) prior to its execution, the transaction has met the
requirements described in section III (as discussed below.)

In considering the availability of this class exemption, the party who is to
engage in the transaction should carefully determine whether the contemplated
transaction contains terms and conditions which closely parallel the
transaction delineated in the prior exemptions granted by the Department and
the material facts and representations supporting such exemptions. In
particular, the Department wishes to note that the relief provided by the class
exemption is available for a specific transaction only to the extent that the
relief from the same restrictions has been provided in the two substantially
similar individual exemptions that were submitted to the Department by the
party that wishes to engage in the transaction.

As a precondition for a grant of relief from the fiduciary self-dealing and
conflict of interest restrictions of section 406(b) of ERISA, section II(d) and
(e) require that prior to execution of such transaction, an independent
fiduciary has reviewed the proposed transaction and determined that the
transaction would be in the interests and protective of the plan and its
participants and beneficiaries, and later represents the interests of the plan
in the execution of the transaction. Under section II(f), for those
transactions that are continuing in nature, such as leases and loans, the
independent fiduciary must: (1) represent the interests of the plan for the
duration of the transaction; (2) monitor the transaction on behalf of the plan;
(3) enforce compliance with all conditions and obligations imposed on any party
dealing with the plan with respect to the transaction; and (4) ensure that the
transaction remains in the interests of the plan.5

The Department notes that any relief from section 406(b) provided under
section II of the proposal required the involvement of an independent
fiduciary. Section II required that the independent fiduciary review and
approve the transaction and, where the transaction was continuing in nature,
monitor the transaction and represent the interests of the plan throughout the
duration of the transaction. However, it was brought to the attention of the
Department that certain types of exemptions which provided section 406(b)
relief for transactions such as sales of property by the plan to certain
parties in interest or loans from the individually directed accounts of
participants in plans to those participants, may not have required the
involvement of an independent fiduciary. Accordingly, the Department has
modified the final exemption to clarify that the involvement of an independent
fiduciary as described in section II is required only if the exempted
transactions described in either of the two previously granted exemptions cited
by the party required the involvement of an independent fiduciary. If an
independent fiduciary is required for the contemplated transaction, then the
fiduciary's involvement must comply with the requirements of section II.

The Department notes that the independent fiduciary should be knowledgeable
and experienced with respect to the type of transaction. In this regard, any
unique qualifications of the independent fiduciaries utilized in the
substantially similar individual exemptions should be considered when retaining
an independent fiduciary. Further, in determining a potential fiduciary's
independence from the parties to the transaction, consideration should be given
to such person's relationship to the other parties involved in the contemplated
transaction in terms of any affiliation between such person and the other
parties to the transaction, as well as whether such person derives more than a
de minimis amount of compensation from the other parties to the transaction.

Section III of the exemption contains the authorization requirements for a
transaction. Section III(a)(1) requires that the party who will be engaging in
such transaction file a written submission with the Department containing a
specific statement to demonstrate compliance with the conditions of the class
exemption. The purpose of the authorization requirements of section III is to
enable the Department to examine the written submission to determine whether
the transaction, in fact, complies with the requirements of the class
exemption. The written submission must clearly state that it is made pursuant
to the class exemption rather than under the Department's procedures for
considering individual exemptions.6

Section III(a)(2) requires that the submission include the same information
that is required to be submitted with an individual exemption application. The
Department believes this condition will assure a full and comprehensive file
upon which the Department can base its conclusions concerning the availability
of this class exemption. The Department's experience in considering individual
exemption requests has demonstrated that it is difficult to approve an
exemption for a particular transaction without the ability to examine the
surrounding facts and circumstances. In a number of instances, examination of
the facts and circumstances has revealed past or potential violations of the
provisions of Title I of the Act or other significant issues which must be
resolved prior to granting an exemption. Similarly, the Department believes
that it is important to examine the supporting documentation for a transaction,
such as appraisals and independent third party representations regarding the
transaction. This information frequently discloses additional issues which must
be addressed by the applicants and is required under the individual exemption
procedures to be submitted to the Department in an individual exemption
application. Rather than developing a separate set of requirements under this
class exemption for the submission of relevant information, the Department
believes that reference to the individual exemption procedure, already an
established and familiar procedure, was a more appropriate approach. The
information required by the procedure, which is published at 29 CFR 2570.34 and
.35 is designed to minimize the need to subject applicants to repeated
requested for additional information after the application is filed. As an
additional consideration, this condition will permit the written submission to
be considered under the Department's individual exemption procedures in the
event that the Department is unable to conclude from the written submissions
that the conditions of the class exemption would be met.

Under section III(a)(3), the party who will be engaging in the transaction
must demonstrate that the proposed transaction presents little, if any, risk of
abuse or loss to the plan participants and beneficiaries given the terms and
conditions of the transaction. The Department interprets section III(a)(3) as
requiring that the party demonstrate that the facts and circumstances
surrounding the transaction at the time the transaction is entered into present
little, if any, risk of abuse or loss to the plan participants and
beneficiaries. It was not the intention of the Department to make the party who
engaged in the transaction responsible for all unforeseen events that occur at
some later date. Section III(a)(4) requires that the party compare the proposed
transaction to those previously exempted transactions identified by the party
as substantially similar. In this regard, any comparison must include a
description of any material differences between the proposed transaction and
the identified exemptions.

Section III(a)(5) requires that a complete and accurate draft of the notice
which will be distributed to interested persons be submitted to the Department.
The Department believes that it is necessary to review the notice prior to its
distribution to interested persons in order to assure that a completely
objective summary of the proposed transaction has been prepared by the party.
The purpose of the notice requirement is to afford interested persons with the
opportunity to provide the Department with relevant information based upon an
objective description of the transaction to assist the Department in its
consideration of the proposed transaction. The term "notice" is
defined in section IV(b) as a written notification to interested persons which
includes an objective description of the transaction, the approximate date on
which the transaction will occur, a statement that the proposed transaction has
met the requirements for tentative authorization under this class exemption, a
statement apprising interested persons of their right to comment, the Federal
Register citations for the prior exemptions identified by the party as
substantially similar to the contemplated transaction and the expiration date
of the comment period. The expiration date of the comment period obviously
cannot be determined as of the date of the written submission, but must be
included when notice is distributed to interested persons. The notice must also
contain a statement directing interested persons to submit comments to the
Department for consideration. In order to simplify the submission of comments,
the Department has modified the final exemption to require that the notice
contain the address of the Department. The address is as follows: Office of
Exemption Determinations, U.S. Department of Labor, 200 Constitution Avenue,
N.W., Room N- 5649, Washington, D.C. 20210.

With respect to a transaction described in section II of this exemption,
section III(b) provides that the written submission must also contain the
following additional information: (1) the identity of the independent
fiduciary; (2) a description of such fiduciary's independence from the parties
in interest involved in the subject transaction; (3) a statement by the
independent fiduciary containing an explanation as to why the subject
transaction is in the interests and protective of the participants and
beneficiaries of the plan; (4) an agreement by the independent fiduciary to
represent the interests of the plan; and (5) a description of the procedures
for replacement of the independent fiduciary, if necessary, during the term of
the transaction. As previously explained in response to a comment, the
description of the independence of the fiduciary may be accomplished by a brief
discussion in the written submission describing any relationship between the
fiduciary and the other parties to the contemplated transaction in terms of any
affiliation and the amount of any income derived by the fiduciary from the
other parties.

The written submissions will be reviewed by the Department to ensure that
the conditions of this class exemption are met. If the Department determines
that a submission does not meet the requirements for the class exemption, the
Department will notify the party and, if the party so desires, the Department
will consider the submission under the Department's exemption procedure for
individual exemptions.

The exemption requires, under section III(c), that the transaction meet the
requirements for tentative authorization. "Tentative authorization"
is defined under section IV(c) as occurring upon the earlier of: (1) the
expiration of the 45-day period following acknowledgement by the Department of
the receipt of the written submission with respect to the proposed transaction,
unless the Department has notified the party who is to engage in the
transaction during this period that the transaction is not eligible for
authorization under the terms of this class exemption, or (2) the issuance of a
written determination by the Department during the 45-day period that the
proposed transaction meets the requirements for tentative
authorization.7 In view of the broad scope of relief provided under
the exemption, and the need to protect the interests of the plan's participants
and beneficiaries, the Department believes it necessary to retain the authority
to determine, prior to the execution of the transaction, whether the
transaction is substantially similar to previously exempted transactions and
presents little, if any, risk of abuse or loss to the plan participants and
beneficiaries. This determination will be made within 45 days from the
Department's acknowledgement of the receipt of the written submission. In order
to protect the interests of participants and beneficiaries, the Department
believes that the 45-day period is the minimum amount of time necessary for a
thorough review of the written submission, and a comparison of the facts and
circumstances surrounding the transaction under consideration to the
transactions contained in the two prior exemptions cited by the party as
substantially similar. Although in some cases, the Department expects that it
will be able to complete its review and issue a determination letter in less
than 45 days, the Department believes that a shorter time limit for this
process would not be workable. Starting the review period from the date of the
Department's acknowledgement of receipt of the written submission assures that
the Department will have the full 45-day period in which to complete its
review. Under the class exemption, the party seeking to engage in the
transaction will also receive quick assurance that the Department has received
its submission and that the 45-day period is running.

The Department will send a letter to each party acknowledging receipt of the
written submission. Generally, the acknowledgement letter will be sent within
three to five days of actual receipt of the written submission by the
Department. The 45-day period for tentative authorization will commence as of
the date of the acknowledgement letter. In this regard, the Department notes
that the party may not assume receipt of the written submission by the
Department until the party receives an acknowledgement letter. Since the
acknowledgement letter may be the only formal written communication between the
party and the Department, the acknowledgement letter will also contain a brief
summary of the requirements for tentative authorization and final authorization
of the transaction, to assist the party in understanding the requirements of
the class exemption.

Section III(d) provides that, following tentative authorization, the party
who is to engage in the transaction provides written notice (as defined in
section IV(b)) to interested persons. Tentative authorization, in effect,
permits the party to begin the distribution of written notice to interested
persons. The exemption does not specify the manner in which written notice must
be provided to interested persons. However, section III(d) requires that notice
be given in a manner that is reasonably calculated to result in the receipt of
such notice by interested persons. It is the responsibility of the party who is
to engage in the transaction to promptly distribute notice after tentative
authorization is obtained, because the 25- day comment period, as defined under
section IV(e), will not commence until the notification to all interested
persons is complete. The notice must also inform interested persons of the date
of expiration of the comment period in accordance with section IV(b)(5). Since
the date of completion of the notification is within the control of the party
who is to engage in the transaction, the Department expects the party who
provides written notice to take this into account in determining the expiration
date of the comment period. It is also the responsibility of the party to
inform the Department of the date upon which notification was completed and the
date the comment period expires. In order to avoid unnecessary delay, the
Department strongly encourages parties to notify it regarding the expiration of
the comment period as soon as possible following tentative authorization, but
in no event later than the expiration of the 25-day comment period.

The Department recognizes that there may be difficulties in determining the
completion date for notification and, thus, the expiration of the comment
period. To ease compliance with the requirements of the class exemption, the
Department is of the view that distribution of notice will be deemed complete
under section IV(e) on a date the party determines through a good faith
estimate of the time necessary to complete distribution of notice. In the case
of notification by first-class mail, the Department specifically has modified
section IV(e) to provide that completion of the distribution of the notice will
be deemed satisfied three business days following the date of the first class
mailing to interested persons.

In addition, section III(d) requires that the party who is to engage in the
transaction resolve all substantive adverse comments submitted to the
Department to the satisfaction of the Department. The term "substantive
adverse comments," as defined in section IV(f), means those comments
submitted by interested persons to the Department within the prescribed comment
period which raise significant factual, legal or policy issues regarding the
transaction as determined by the Department. "Final authorization" is
defined in section IV(d) as the end of the five-day period immediately
following the expiration of the comment period unless the Department notifies
the party within that period that the transaction is not eligible for
authorization, or the expiration of a period of time extending beyond the
five-day period as mutually agreed to by the Department and the party in order
to resolve any substantive adverse comments submitted to the Department. The
five-day period between the expiration of the comment period and final
authorization is intended to allow consideration by the Department of comments
received within the 25-day comment period. If mutual agreement between the
Department and the party who is to engage in the transaction is not reached
regarding the period of time in which such comments must be resolved, the party
will be notified that the transaction fails to comply with the conditions of
the class exemption, and the written submission will be considered by the
Department in accordance the Department's exemption procedures at 29 CFR 2570,
subpart B.

The Department will not consider a proposed transaction to satisfy the
conditions of this proposed class exemption unless the material facts and
representations contained in the written submission and in any materials and
documents submitted in support of the written submission are true and complete.
In this regard, with respect to transactions that are continuing in nature,
such as a loan or a lease, any change in the material facts described in the
written submission with respect to the transaction may result in the
prospective unavailability of the class exemption for the transaction. In the
event of any such change, the parties involved in the transaction have the
option of applying for a new exemption, either pursuant to this class exemption
or under the Department's exemption procedures at 29 CFR 2570, subpart B.

The Department has determined to include in the exemption, as a new section
V, an optional checklist of the information required to be submitted to the
Department under section III of the exemption. The Department recognizes that,
because of oversight, items required for the written submission described in
section III may be accidentally omitted causing potential delay to the party
who wishes to engage in the transaction. The Department believes that
utilization of the checklist by the party during its preparation of the written
submission will help avoid such omissions and assure that the submission is
complete. However, the Department notes that use of the checklist described in
section V is completely optional and need not be prepared as part of the
written submission.

Examples

The application of the exemption may be illustrated by the following
examples:

EXAMPLE (1): ABC Company files a written submission under the class
exemption for a loan of money from a plan for which it currently provides
accounting services. Because the loan would be prohibited under section 406(a),
ABC needs an exemption for the loan. ABC cites in its written submission two
prior exemptions for loans whose terms are substantially similar to those
proposed in the ABC Company submission. However, one loan is from a plan to the
plan's non-discretionary broker and the other loan is to the plan's actuary.
Both loans are for twice the amount proposed in the ABC Company submission, but
are for less than 25 percent of the assets of the plans involved. Provided the
amount of the ABC Company loan is less than 25 percent of the assets of the
plan, these distinctions would not cause the proposed transaction to fail the
substantially similar test of section I(a). In addition, the substantially
similar test is applied with respect to the transactions described in the two
prior exemptions and not the parties involved in the transactions.

EXAMPLE (2): An exemption application is submitted to the Department
by applicant X, the sponsor of plan Y, for a lease of office space by plan Y to
X. The transaction proposed is similar in all material respects to four other
exemptions granted by the Department within the last five years. Applicant X,
however, does not make a specific declaration that the application is submitted
with the intention of demonstrating compliance with the class exemption, and
there is no information which otherwise complies with sections I, II and III of
the class exemption. The application may be considered by the Department
pursuant to individual exemption procedures unless the applicant amends its
original written submission and provides the required information. At that
point, the Department will acknowledge receipt of the written submission
requesting expedited authorization under the class exemption.

EXAMPLE (3): In 1994, two exemptions were granted for loans by
pension plans to Corporation A and Corporation B, respectively, the sponsoring
employers. The loan to Corporation A was for $50,000. The loan to Corporation B
was for $75,000. Among the conditions and material representations contained in
both exemptions were the following: the loans would be approved and monitored
by an independent fiduciary; the term of the loans could extend no more than
five years; regular installment payments of principal and interest had to be
made during the term; the collateral consisting of real property had to be
maintained at all times at a value of at least 150 percent of the outstanding
balance of the loan; and no more than 25 percent of the assets of the plan
would be involved in loans to the sponsoring employer. In 1996, X Corporation
makes a written submission pursuant to the class exemption with respect to a
proposed loan from its plan. The proposed transaction, including the terms and
conditions of the loan and the creditworthiness of the borrower, is
substantially similar to the exemptions granted to Corporation A and
Corporation B, except that the loan is for $400,000 and the term is seven
years. X Corporation cites the previously granted exemptions in its submission
and demonstrates that the 25 percent limitation on the amount of assets
involved in loans to the employer would be met. These differences in dollar
amounts and loan term would not cause the transaction to fail the
"substantially similar" test under sections I(a) and II(a).

If, however, in addition to these differences (i.e., dollar amounts and loan
term), the loan transaction proposed by X Corporation also included different
repayment provisions requiring monthly payments of interest only during the
loan term and a balloon payment of principal at the end of the term, the relief
afforded by the class exemption would not be available because the terms of the
proposed loan are not alike in all material respects within the meaning of
sections I(a) and II(a) to the previous loan exemptions granted by the
Department and cited by the applicant.

EXAMPLE (4): In 1994, Investment Adviser X is granted a conditional
exemption which permits plans for which it provides investment management
services to purchase units of a limited partnership for which X is the general
partner. In 1996, the assets of X are sold to Y. Y subsequently makes a written
submission pursuant to the class exemption for the same transactions which were
the subject of the exemption granted to X. In addition to the exemption granted
to X, Y cites in its submission one other substantially similar exemption
granted by the Department within the last five years. The relief afforded by
the exemption would be available because the terms and conditions of the
transaction are substantially similar to previous exemptions granted by the
Department.

EXAMPLE (5): Firm C makes a written submission pursuant to the class
exemption for the sale of property by its plan to C. The written submission is
received by the Department on April 1. On April 3, the Department sends an
acknowledgement letter to C. Forty-five days elapse from April 3, the date of
the acknowledgement letter, without notification from the Department that the
transaction is not eligible for authorization under the terms of the class
exemption. Pursuant to the exemption, C proceeds to distribute notice to
interested persons by first class mail. Completion of notice is deemed to occur
three days following the date of a first class mailing. On the 24th day
following completion of notice, the Department receives a comment from an
interested person raising significant factual concerns regarding the sale. At
this point, if the comment cannot be resolved within the five-day period
following the expiration of the comment period, the Department and C can
mutually agree, pursuant to section IV(d) of the exemption, to a date beyond
this period, at which time the comment must be resolved to the Department's
satisfaction in order for the transaction to be authorized under the terms of
the exemption. If the Department and C cannot agree to an extended date, the
transaction will not receive final authorization and the exemption will not be
available for such transaction.

PAPERWORK REDUCTION ACT ANALYSIS

The collection of information contained in this final class exemption has
been approved by the Office of Management and Budget after review under section
3507(d) of the Paperwork Reduction Act of 1995, and has been given OMB control
number 1210-0098.

Comments were solicited on the Department's need for this information; an
explanation of how the collection of information contained in the final class
exemption was amended in response to any comments received from OMB or the
public is contained in the preamble, above. This discussion includes the
identification and explanation of those modifications made in the class
exemption, and an explanation of why certain comments were rejected.

Persons who are to respond to this collection of information are not
required to respond to the collection of information unless it displays a
currently valid OMB control number. The OMB control number displayed above is
valid through September 1998.

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption under section
408(a) of ERISA and section 4975(c)(2) of the Code does not relieve a fiduciary
or other party in interest or disqualified person with respect to a plan from
certain other provisions of ERISA and the Code to which the exemption does not
expressly apply and the general fiduciary responsibility provisions of section
404 of ERISA. Section 404 requires, in part, that a fiduciary discharge his or
her duties respecting the plan solely in the interests of the participants and
beneficiaries of the plan and in a prudent fashion in accordance with section
404(a)(1)(B) of ERISA. This exemption does not affect the requirement of
section 401(a) of the Code that a plan must operate for the exclusive benefit
of the employees of the employer maintaining the plan and their beneficiaries.

(2) In accordance with section 408(a) of the Act and section 4975(c)(2) of
the Code, and based upon the entire record, the Department finds that the
exemption is administratively feasible, in the interests of plans and of their
participants and beneficiaries and protective of the rights of the participants
and beneficiaries.

(3) The exemption is supplemental to, and not in derogation of other
provisions of ERISA and the Code, including statutory or administrative
exemptions and transitional rules. Furthermore, the fact that a transaction is
subject to an administrative or statutory exemption is not dispositive of
whether the transaction is in fact a prohibited transaction.

(4) The exemption is applicable to a transaction only if the conditions
specified in the class exemption are satisfied.

Exemption

Accordingly, the following exemption is granted under the authority of
section 408(a) of ERISA, section 4975(c)(2) of the Code, and section 8477(c)(3)
of FERSA and in accordance with the procedures set forth in 29 CFR 2570,
subpart B (55 FR 32836, August 10, 1990).

Section I - General Exemption. Effective [insert date of publication in
FEDERAL REGISTER of this grant of class exemption], a restriction described in
section 406(a) of ERISA, and the taxes imposed by sections 4975(a) and (b) of
the Code, by reason of a parallel provision described in section 4975(c)(1)(A)
through (D) of the Code, shall not apply to a transaction between a plan and a
party in interest with respect to such plan, provided the following conditions
are met:

(a) The transaction is substantially similar (as defined in section IV(a))
to transactions described in at least two individual exemptions that were
granted by the Department, and provided relief from the same restriction,
within the 60-month period ending on the date of filing of the written
submission referred to in section III(a);

(b) There is little, if any, risk of abuse or loss to the plan participants
and beneficiaries as result of the transaction; and

(c) Prior to its execution, the transaction has met the requirements
described in section III.

Section II - Specific Exemption. Effective [insert date of publication in
FEDERAL REGISTER of this grant of class exemption], a restriction described in
sections 406(b) of ERISA or a parallel restriction described in section
8477(c)(2) of FERSA, and the taxes imposed by sections 4975(a) and (b) of the
Code, by reason of a parallel provision described in section 4975(c)(1)(E) and
(F) of the Code, shall not apply to a transaction between a plan and a party in
interest with respect to such plan, provided the following conditions are met:

(a) The transaction is substantially similar (as defined in section IV(a))
to transactions described in at least two individual exemptions that were
granted by the Department, and provided relief from the same restriction or, if
FERSA relief is requested, the ERISA relief provided parallels the restrictions
of section 8477(c)(2) of FERSA, within the 60-month period ending on the date
of filing of the written submission referred to in section III(a);

(b) There is little, if any, risk of abuse or loss to the plan participants
and beneficiaries as a result of the transaction;

(c) Prior to its execution, the transaction has met the requirements
described in section III;

(d) Where either of the previously granted exemptions identified in the
written submission described in section III, required the involvement of an
independent fiduciary, an independent fiduciary has reviewed the proposed
transaction and determined that the transaction would be in the interests and
protective of the plan and its participants and beneficiaries;

(e) The independent fiduciary described in section II(d) represents the
interests of the plan in the execution of the transaction; and

(f) If the transaction is continuing in nature, the independent fiduciary
described in section II(d) -

(i) represents the interests of the plan for the duration of the transaction
and monitors the transaction on behalf of the plan;

(ii) enforces compliance with all conditions and obligations imposed on any
party dealing with the plan with respect to the transaction; and

(iii) ensures that the transaction remains in the interests of the plan.

Section III: Authorization Requirements. The requirements for this section
are met if:

(a) A written submission is filed with the Department with respect to the
transaction which contains the following information:

(1) a separate written declaration by the party who is to engage in the
transaction that the written submission is made with the intention of
demonstrating compliance with the conditions of this class exemption;

(2) all information required to be submitted with an individual exemption
application in accordance with the procedures set forth in 29 CFR 2570 subpart
B;

(3) a specific statement demonstrating that the proposed transaction poses
little, if any, risk of abuse or loss to the plan participants and
beneficiaries;

(4) a comparison of the proposed transaction to at least two substantially
similar transactions which were the subject of individual exemptions granted by
the Department within a sixty month period ending on the date of the filing of
the written submission and an explanation as to why any differences should not
be considered material for purposes of this exemption; and

(5) a complete and accurate draft of the notice (as defined in section
IV(b)) prepared for distribution to interested persons and a description of the
proposed method of distribution for such notice.

(b) With respect to transactions described in section II of this exemption,
the written submission referred to in section (a) above contains the following
additional information:

(1) the identity of the independent fiduciary;

(2) a description of such fiduciary's independence from the parties in
interest involved in the subject transaction;

(3) a statement by the independent fiduciary containing an explanation as to
why the subject transaction is in the interests and protective of the
participants and beneficiaries of the plan(s) involved;

(4) an agreement by the independent fiduciary to represent the interests of
the plan(s) involved in the transaction; and

(5) a description of the procedures for replacement of the independent
fiduciary, if necessary, during the term of the transaction.

(c) The transaction meets the requirements for tentative authorization (as
defined in section IV(c)) from the Department.

(d) Following tentative authorization, the party who is to engage in the
transaction provides written notice (as defined in section IV(b)) to interested
persons in a manner that is reasonably calculated to result in the receipt of
such notice by interested persons, informs interested persons of the date of
the expiration of the comment period, and resolves all substantive adverse
comments (as defined in section IV(f)) to the satisfaction of the Department.

(e) The transaction meets the requirements for final authorization (as
defined in section IV(d)).

Section IV: Definitions

(a) The term "substantially similar" means alike in all material
respects as determined by the Department, in its sole discretion.

(b) The term "notice" means written notification to interested
persons which includes -

(1) an objective description of the transaction, including all material
terms and conditions,

(2) the approximate date on which the transaction will occur,

(3) a statement that the proposed transaction has met the requirements for
tentative authorization under this exemption,

(4) a statement apprising interested persons of their right to comment to
the Department on the proposed transaction at the following address: Office of
Exemption Determinations, U.S. Department of Labor, 200 Constitution Avenue,
N.W., Room N-5649, Washington, D.C. 20210,

(5) the expiration date of the comment period, and

(6) the Federal Register citations for the prior exemptions identified by
the party as substantially similar to the contemplated transaction.

(c) For purposes of this exemption, "tentative authorization"
occurs upon the earlier of:

(1) the expiration of the 45-day period following an acknowledgement by the
Department of receipt of the written submission with respect to the transaction
under this exemption unless the Department has notified the party who is to
engage in the transaction during that period that the transaction is not
eligible for authorization under the terms of this exemption; or

(2) the issuance of a written determination by the Department during the
45-day period that the proposed transaction meets the requirements for
tentative authorization.

(d) For purposes of this exemption "final authorization" occurs
upon the expiration of:

(1) the five (5) day period immediately following the comment period (as
defined in section IV(e)), unless the Department notifies the party that the
transaction is not eligible for authorization under the terms of this
exemption, and

(2) if necessary in order to resolve any substantive adverse comments
received by the Department from interested persons within the comment period, a
period of time extending beyond the five-day period immediately following the
comment period as mutually agreed between the Department and the party.

(e) The term "comment period" means the 25-day period following
the completion of distribution of the notice to interested persons by the party
who is to engage in the transaction. For this purpose, distribution of notice
by first class mail will be deemed complete three business days following the
date of mailing to interested persons.

(f) The term "substantive adverse comments" means those comments
submitted by interested persons to the Department within the prescribed comment
period which raise significant factual, legal or policy issues regarding the
transaction as determined by the Department.

Section V - Optional Checklist. Completion and submission of the following
optional checklist to accompany the written submission described in section
III(a) will assist the Department in the consideration of the transaction under
the class exemption.

The written submission filed with the Department contains the following
information:

[ ] A separate written declaration of intent to comply with the conditions
of the class exemption.

[ ] All information required to be submitted with an individual exemption
application under 29 CFR 2570 subpart B.

[ ] A statement demonstrating that the transaction poses little, if any,
risk of abuse or loss to the plan participants and beneficiaries.

[ ] A comparison of the proposed transaction to at least two substantially
similar transactions which were the subject of individual exemptions granted
within the 60 month period ending on the date of the filing and an explanation
why any differences should not be considered material.

[ ] A complete and accurate draft of the notice to interested persons (as
defined in section IV(b)).

[ ] A description of the proposed method of distribution of for such notice.

If either of the previously granted exemptions identified in the written
submission required the involvement of an independent fiduciary, the written
submission must contain the following additional information:

[ ] The identity of the independent fiduciary responsible for reviewing the
proposed transaction, and representing the interests of the plan in the
execution of the transaction. (If the transaction is continuing in nature, the
independent fiduciary represents the interests of the plans for the duration of
the transaction and takes all necessary action on behalf of the plan.)

[ ] A description of such fiduciary's independence from the parties involved
in the transaction.

[ ] A statement from the independent fiduciary explaining why the
transaction is in the interests and protective of the plan participants and
beneficiaries.

[ ] An agreement by the independent fiduciary to represent the interests of
the plan.

[ ] A description of the procedures for the replacement of the independent
fiduciary, if necessary, during the term of the transaction.

The notice to interested persons filed with the Department includes the
following information:

[ ] An objective description of the transaction, including all material
terms and conditions.

[ ] The approximate date on which the transaction will occur.

[ ] A statement that the transaction has met the requirements for tentative
authorization under the exemption.

[ ] A statement apprising interested persons of their right to comment on
the proposed transaction at the address contained in the exemption.

[ ] The expiration date of the comment period.

[ ] The Federal Register citations for the two prior exemptions identified
as substantially similar to the contemplated transaction.

Signed at Washington, D.C., this 26th day of July 1996.

Olena Berg,
Assistant Secretary for Pension and Welfare Benefits,

U.S. Department of Labor

1Section 102 of Reorganization Plan No. 4 of 1978 (43 FR 47713,
October 17, 1978) generally transferred the authority of the Secretary of the
Treasury to issue administrative exemptions under section 4975(c)(2) of the
Code to the Secretary of Labor.

2The Department is authorized to grant exemptive relief from the
restrictions of FERSA section 8477(c)(2) pursuant to section 8477(c)(3) of
FERSA. The restrictions of FERSA section 8477(c)(2) parallel section 406(b) of
ERISA.

3In making a finding that an exemption is administratively
feasible under section 408(a) of ERISA, in that it requires no continuing
administrative burden on behalf of the Department, the Department generally has
required the involvement of an independent fiduciary to represent the plan for
transactions that require relief from section 406(b) of ERISA.

4References to sections 408(a) and 406(a) and (b) of ERISA
incorporate the corresponding provisions of section 4975 of the Code.

5The written submission referred to section III should include
specific information regarding the methods proposed by the independent
fiduciary for: monitoring the transaction; enforcing compliance with all the
conditions and obligations imposed on the parties dealing with the plan; and

ensuring that the transaction remains in the interests and protective of the
participants and beneficiaries of the plan.

6See 29 CFR part 2570, subpart B.

7The Department does not intend to issue written determinations
of tentative authorization except in unusual situations where the Department
deems it appropriate to do so.